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Financial literacy improves people's savings, says Icelandic pensions expert

31/05/2019 Posted by IAPF | Comments(0)

Financial literacy is a cornerstone of society and improving it increases pension savings, said Icelandic pension fund EFÍA manager Snædís Ögn Flosadóttir.

Speaking at the Irish Association of Pension Funds (IAPF) Annual DC Conference in Dublin, Flosadóttir spoke about how the financial industry is teaching 15-year-old schoolchildren about pensions in order to raise savings and awareness.

Flosadóttir said: “Financial literacy is one of the cornerstones of individual wellbeing and to society. You need people to understand how finance works and you need them to understand how pensions work as well.” 

The main problem is the overflow of information, she explained, as people would be interested in pension funds if they had the time to do it, but as a functioning member of society, people must know “so many things”. 

“We have struggled with the idea that we might be boring. People don’t seem to be interested, at all,” Flosadóttir said. “But I have come to the conclusion that we are not boring at all. We are actually super-fun.”

The project is a team effort by the Icelandic financial services association and the national association of the pension funds. Every single worker and member of the financial institutions is offered to participate.

Flosadóttir noted that there are 15-year-olds who work part-time who already pay into their pensions. “They have started to realise that this is something they need to know about.”

The focus is on key elements of financial literacy. Because we are starting early we are not talking about pension schemes or asset allocation, it is not relevant. We are explaining what a pension fund is, how it works, what you are paying into it, how much does your employer pay in, what is a supplementary pension fund. 

“We don’t know yet how much we have improved financial literacy of the nation because this problem has going on for a long time,” she said.

“But it is my feeling that we are making progress. We have reached up to 97 per cent of 15-year-old students last year. That is really impressive. Although we have to remember, the nation of Iceland is quite small, 350,000. But everything is relative, and given the fact that we are so few financial institutions and pension funds, it is not easy either.”

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